Definition of pro forma statement

hypothetical financial statement showing assets and liabilities, or income and expenses that may be recognized in the future. Pro forma statements also can illustrate projected earnings if a company were to merge with another, or sell off part of its operations. Business firms often are asked to submit pro forma statements when making a loan application. For example, a loan request for bank financing to purchase and carry inventory ordinarily would include a pro forma statement showing the impact of the amount borrowed on current assets and liabilities in the most recent balance sheet. Banks also use pro forma statements to indicate expected revenues from a bank acquisition or merger with another bank, from a joint venture that involves equity participation with other firms, or anticipated income and cash flow from a new business activity.